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As oil prices in the second quarter retreated to about half of what they were a year ago, many observers were watching to see whether Exxon Mobil's (XOM) profits would also be halved. It seems the answer to that is a resounding yes as the oil giant's profit tumbled 66 percent, missing Wall Street estimates by a mile.

Analysts had been expecting Exxon Mobil to report a second-quarter profit of $1.02 a share, half of last year's $2.03 EPS, on sales of $71.3 billion, according to Thomson Reuters estimates. The oil giant reported earnings of 84 cents per share, excluding items, not even coming near those projections. Exxon didn't even manage to post better earnings than in the first quarter when oil prices were about 35 percent lower than the second, something BP (BP), for example, had accomplished.

Exxon Mobil's second-quarter net income fell to $3.95 billion, or 81 cents a share, from $11.68 billion, or $2.22 a share in the year-ago period. Excluding items, earnings fell to $4.09 billion, or 84 cents a share, from $2.27 a share. Revenue, at least, beat analyst estimates, falling 46 percent to $74.5 billion from $138.1 billion a year ago.

Other important measures show that capital spending fell 6 percent to $6.56 billion and production fell 3 percent from a year earlier. Earnings for the second quarter of 2009 included a special charge of $140 million for interest related to the Valdez punitive damages award.

Of course, not surprising, tightening margins have hurt the company as oil prices have declined, hampered by the global recession that's been affecting demand and causing high inventory levels.

Investors may be also disappointed by how Exxon has been using its capital during this time of weak fuel prices, even if it said it is continuing to invest at record levels between $25 billion and $30 billion over the next five years.

Shares across the oil sector closed Wednesday's trading session lower following the U.S. energy department report of an unexpected increase in crude stocks. For Exxon shares, which year-to-date declined 10 percent, it looks as if that will continue. However, in 2008, Exxon's shares only fell 15 percent compared to the 34 percent decline in the Dow Jones industrial average.

The question is what will happen going forward. BP's CEO said he expects oil prices to be in the lower end of a $60-$90 range short-term, which is slightly is about the same to lower than current oil prices. If that's the case, Exxon has to quickly get on board with more cost savings measures.

The company everybody loves to hate, still managed quite a healthy profit and is not going to see any pity from consumers who still remember the pain of last year's gas prices and Exxon's record profit on their backs. From its part, Exxon has finally done something that might start mending its image in the public eye. Just two weeks ago, the company announced an agreement with Synthetic Genomics to research and develop next-generation biofuels from photosynthetic algae.

Shares of Exxon Mobil have declined 2.6 percent in pre-market trade at last check.